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BALANCE SHEET ANALYSIS
2009 ² 2010

Submitted To: Dr. Vibha Jain Submitted By: Group 8


Abhinandan Jakhar 043002
Anirudh Singh 043010
Sumeet Anand 043056
Vakul Sharma 043057
Vineet Bhadu 043060
About Asian Paints
Asian Paints is India's largest paint company and ranked among the top ten Decorative coatings
companies in the world with a turnover of INR 66.80 billion. Asian Paints has operations in 17
countries across the world with 23 paint manufacturing facilities, servicing consumers in 65 countries.

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Horizontal Balance Sheet of Asian Paints Ltd. As at 31 March 2010
Horizontal Balance Sheet of Asian Paints Pvt Ltd as at 31st March 2010
2010 2009 Increase/Decrease over 2009
(Rs in Crores) (Rs in Crores) (Rs in Crores) %age

FUNDS EMPLOYED
Shareholders' Funds
Share Capital 95.92 95.92 0 0.00
Reserves and Surplus 1,461.30 998.55 462.75 46.34
1,557.22 1,094.47 462.75 42.28

Loan Funds
Secured Loans 24.59 25.59 24.59 1 4.07
Unsecured Loans 43 49.94 -6.94 -13.90
68.59 74.53 -5.94 -7.97

Deferred Tax Liability (Net) 47.9 47.91 -0.01 -0.02

TOTAL 1,673.71 1,216.91 456.8 37.54

APPLICATION OF FUNDS
Fixed Assets
Gross Block 1,194.39 1,116.93 77.46 6.94
Less : Depreciation/Amortisation 486.93 494.02 -7.09 -1.44
Net Block 707.46 622.91 84.55 13.57
Add : Capital Work in Progress 380.72 88.86 291.86 328.45
1,088.18 711.77 376.41 52.88

Investments 703.69 234.77 468.92 199.74

Current Assets, Loans and Advances


Interest accrued on investments 0.16 0.16 0 0.00
Inventories 763.14 546.71 216.43 39.59
Sundry debtors 331.43 311.02 20.41 6.56
Cash and Bank Balances 28.6 128.26 -99.66 -77.70
Other Current Assets 66.55 48.3 18.25 37.78
Loans and Advances 152.4 193.97 -41.57 -21.43
1342.28 1228.42 113.86 9.27

Less : Current Liabilities and Provisions


Current Liabilities 1,156.27 771.9 384.37 49.80
Provisions 304.17 186.15 118.02 63.40
1,460.44 958.05 502.39 52.44

Net Current Assets -118.16 270.37 -388.53 -143.70

TOTAL 1,673.71 1,216.91 456.8 37.54


Analysis of Balance Sheet

1) Total Assets / Liabilities up by 37.54%


2) Sharp increase in net worth by 42.28%, Loan Funds show a decline by 7.97%. Strong
Financial Position.
3) Fixed Assets increase by 52.88% while the net sales have increased by 20.16%. Not a very
efficient way to utilize fixed assets.
4) Tremendous increase in Investments by 199.74%. Ratio of investment to net worth is also
high, 45.18% in 2010 as compared to 21.45% in 2009. Asian Paints has wisely invested its
money.
5) There is a 39.59% increase in inventory as compared to last year, while the sales have grown
only by 20.16%. This indicates lack of efficiency with regards to inventory management.
6) 6.56% increase in sundry debtors is small as compared to 20.16% increase in sales. This
indicates efficient management of receivables.
7) Current Liabilities grew by 49.80%. Indicates the increase in debt of the company is quite
high.
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Common-sized Balance Sheet of Asian Paints Ltd as at 31 March 2010

Common Sized Balance Sheet of Asian Paints Pvt Ltd as at 31st March 2010
2010 2009
(Rs in Commom Sized (Rs in Commom Sized
Crores) %age Crores) %age

FUNDS EMPLOYED
Shareholders' Funds
Share Capital 95.92 5.73 95.92 7.88
Reserves and Surplus 1,461.30 87.31 998.55 82.06
1,557.22 93.04 1,094.47 89.94

Loan Funds
Secured Loans 24.59 25.59 1.53 24.59 2.02
Unsecured Loans 43 2.57 49.94 4.10
68.59 4.10 74.53 6.12

Deferred Tax Liability (Net) 47.9 2.86 47.91 3.94

TOTAL 1,673.71 100.00 1,216.91 100.00

APPLICATION OF FUNDS
Fixed Assets
Gross Block 1,194.39 71.36 1,116.93 91.78
Less : Depreciation/Amortisation 486.93 29.09 494.02 40.60
Net Block 707.46 42.27 622.91 51.19
Add : Capital Work in Progress 380.72 22.75 88.86 7.30
1,088.18 65.02 711.77 58.49

Investments 703.69 42.04 234.77 19.29

Current Assets, Loans and Advances


Interest accrued on investments 0.16 0.01 0.16 0.01
Inventories 763.14 45.60 546.71 44.93
Sundry debtors 331.43 19.80 311.02 25.56
Cash and Bank Balances 28.6 1.71 128.26 10.54
Other Current Assets 66.55 3.98 48.3 3.97
Loans and Advances 152.4 9.11 193.97 15.94
1342.28 80.20 1228.42 100.95

Less : Current Liabilities and


Provisions
Current Liabilities 1,156.27 69.08 771.9 63.43
Provisions 304.17 18.17 186.15 15.30
1,460.44 87.26 958.05 78.73

Net Current Assets -118.16 -7.06 270.37 22.22

TOTAL 1,673.71 100.00 1,216.91 100.00


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Multi-step Profit&Loss account for the year ended 31 March 2010

Vertical Horizontal Common Sized


Multi-step Profit & Loss account for the year ended 31st March 2010
2010 2009 Commom sized
Amount Amount Increase orDecrease Commom sized 2010 2009
Gross Sales 5505.87 4795.23 710.64 14.8197271 107.9131657 112.9312436
Less: Excise Duty 403.74 549.08 -145.34 -26.46973119 7.913165 12.9312436
Net Sales 5102.13 4246.15 855.98 20.15896754 100 100
0
Materials Cost (Materials Consumed,
Purchase of goods & Stock Adjustments) 2840.24 2606.93 233.31 8.949607393 55.66773093 61.39514619
Manufacturing Expenses 129.46 115.09 14.37 12.48588062 2.537371647 2.710455354
Employee Cost 260.84 238.9 21.94 9.183758895 5.112374636 5.626273212
Cost of Goods Sold (COGS) 3230.54 2960.92 269.62 9.105953555 63.31747721 69.73187476
Gross Profit 1871.59 1285.23 586.36 45.62296243 36.68252279 30.26812524

Employee Remuneration- Other than Factory 0 0 0


Administrative, Selling & other Expenses 884.54 747.86 136.68 18.27614794 17.33668095 17.61266088
(+) Other income (Operating) 22.95 23.9 -0.95 -3.974895397 0.449812137 0.562862829
0 0 0 0 0 0
Profit before Depreciation, interest & tax ²
PBDIT 1010 561.27 448.73 79.94904413 19.79565397 13.21832719
Depreciation, Amortisation 60.74 57.15 3.59 6.281714786 1.19048319 1.345925132
Operating Profit - OP/PBIT 949.26 504.12 445.14 88.30040467 18.60517078 11.87240206
Interest & Finance charges 13.76 10.4 3.36 32.30769231 0.269691286 0.244927758
(+) Other income (Non Operating) 143.85 60.06 83.79 139.5104895 2.8 1.41
Profit before tax and extra ordinary items ²
PBTEOT 1079.35 553.78 525.57 94.90591932 21.15489021 13.0419321
(+)/(-) Extra Ordinary Items 25.46 5.9 19.56 331.5254237 0.499007277 0.138949401
Profit before tax for the year - (PBT - Y) 1104.81 547.88 556.93 101.6518216 21.65389749 12.9029827
(+)/(-) Prior year adjustments 0.14 1.95 -1.81 -92.82051282 0.002743952 0.045923955
Profit Before Tax ²PBT 1104.67 545.93 558.74 102.3464547 21.65115354 12.85705875
Provision for Tax: 0
Current Income TAX 334.01 162.8 171.21 105.1658477 6.5464 3.834061444
Deferred Income Tax liability/asset 2.45 16.39 -13.94 -85.05186089 0.0480192 0.385996726
Fringe Benefit Tax 6.78 -6.78 -100 0.159674058
Tax adjustments for previous years 6.29 2.4 3.89 162.0833333 0.2904 0.05652179
Total Income Tax 330.17 183.57 146.6 79.86054366 6.471 4.323210438
Add:Balance brought down from previous
year 230 200 30 15 4.50792 4.710149194
Profit after tax -NP/PAT 1004.5 562.36 442.14 78.62223487 19.6878559 13.2439975

Horizontal Analysis
1.c Net Sales growth by 20.15896754
2.c Increase in expenses like material cost by 8.949607393, interest & finance charges by
32.30769231 and extra-ordinary expenses by 331.5254237 much more than growth in
net sales. However increase in interest & finance charges is inconsequential in view of
the very small base last year as well as in absolute terms. In case of extra-ordinary
expenses absolute figures are not high compared to sales.
3.c Depriciation increased by 6.281714786
4.c Decrease in operating income by -3.974895397 because of decrease in processing
charges.
5.c Growth in Non operating income by 139.5104895 due to increase in short term & long
term investments.
6.c PBT has grown by 102.3464547 due to profit from exceptional items

Return on Investment Ratios:

1)c (RONW% )Return on Net Worth

2010=56.5
2009=35.24
The Increase in the ratio means a high Dividend, more Internal Accruals, suppliers willing to
extend more favourable terms, strengthening of the financial position of the Company .

2)c EPS Earning Per Share

2010= 78.09
2009=38.39
The portion of a company's profit allocated to each outstanding share of common stock.
Earnings per share serves as an indicator of a company's profitability.
3)c CEPS Cash Earning Per Share

2010=84.42
2009=43.12
The company would be able to fulfil it·s financial obligations in the long term in a better
manner.
A measure of financial performance that looks at the cash flow generated by a company on a
per share basis. The higher a company's cash EPS, the better it is considered to have
performed over the period. A company's cash EPS can be used to draw comparisons to other
companies or to the company's own past results.

Solvency Ratios:
1)c NAV Net Asset Value

2010: 162.3
2009: 114.1
The Company has built reserves & surplus to fall back upon.
Higher the ratio higher is the capacity of the co. to raise further capital .

2)c Debt Equity

2010: .44
2009: .68
Co. is relying less on Debt and more on Equity shareholding fund indicating that the co. is
taking less financial risk.

3)c Interest Cover

2010: 62.01
2009: 41.33
The Co,s ability to pay interst out of revenue has increased. The f inancial risk of co. defaulting
has reduced leading to higher comfort level of lenders.

4)c DSCR Debt Service Coverage Ratio

2010: 62.01
2009: 41.33
Increased ability to service debt.

Liquidity Ratios:

1)c Current Ratio

2010: .918
2009: 1.2822
A Ratio of under 1 suggests that a co. would be unable to pay of its obligations if they came up
due at that point. While this shows the company is not in good financial health, it does not
necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is
definitely not a good sign
The current ratio can give a sense of the efficiency of a company's operating cycle or its ability
to turn its product into cash.

2)c Quick Ratio

2010-0.3965
2009-0.7155
It adds further value to all the analytical values of the current ratio. The quick ratio is more
conservative than the current ratio because it excludes inventory and other current assets, which
are more difficult to turn into cash. Therefore, a higher rat io means a more liquid current
position.
Therefore it means there liquidity has reduced.

3)c Inventory Holding Period

2010: 89.017
2009: 69.47
Inventory holding period has increased by around 20 days leading to more cash being blocked
towards keeping inventories.
Advantage: there would be enough raw material present incase of sudden increase in demand.
Disadvantage: Income could have been used for generating profit instead.

Turnover Ratios
1)c Fived Asset Turnover Ratio

2010: 7.211
2009: 6.816
The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-
asset investments. A higher fixed-asset turnover ratio shows that the company has been more
effective in using the investment in fixed assets to generate revenues.
2)c Net Worth Turnover Ratio

2010:1.3499
2001:3.87
It measures the extent of turnover of gross income generated by the networth of the co.
The co.s efficiency of using its net worth to generate net sales has reduced.

Profitability/Profit margin Ratios


1)c GP Gross profit Margin

2010: 36.68
2009: 30.27
The co. has reduced it·s manufacturing expenses and employee costs leading to higher GP%
Materials Cost (Materials Consumed, Purchase of goods & Stock
Adjustments) 2840.24 2606.93
Manufacturing Expenses 129.46 115.09
Employee Cost 260.84 238.9
Cost of Goods Sold (COGS) 3230.54 2960.92
Gross Profit 1871.59 1285.23

2)c PBDIT
2010: 19.79
2009: 13.21
By excluding depreciation, taxes and interest expenses, the figure hones in on the
company's ability to profit and thus makes for easier cross -company comparisons.
3)c OP Operating Profit Margin / PBIT profit before interest and tax
2010: 18.6
2009: 11.87
As operating margin has increased the co. is earning more.

4)c Ratios of Individual Costs and Expenses to Sales (%)

2010: 55.66
2009: 61.39
Rawmaterial used more efficiently. Co. has increased its productivity.

5)c Effective Tax Rate (%)

2010: 30.15
2009: 29.8
Effective Tax Rate hasn·t changed much which implies that the co. hasn·t concentrated much
on tax planning.

Valuation or Capital Market Ratios

1)c P/E (Times)

2010: 25.25
2009: 20.80
An Investor when investing looks at EPS. So a n increase means that the investors perception of
the co. has improved and increased co.s perception in the borrowers market.

2)c Market Price to NAV (Times)

2010: 12.562
2009: 6.847
As the industry has come out of the economic slowdown, the share prices have increased.

3)c Market Capitalisation (Times)

2010: 19554.61
2009: 7539
Helpful in negotiating mergers, acquisitions and takeovers. An increase suggests improved
financial strength of the co.

Accounting Standards followed


AS 1
1. Basis of preparation of financial statement:
(a) Basis of Accounting:
The financial statements have been prepared and presented under the historical cost
convention on accrual basis of accounting to comply with the accounting standards prescribed
in the Companies (Accounting Standards) Rules, 2006 an d with the relevant provisions of the
Companies Act, 1956.
(b) Use of Estimates:
The preparation of financial statements in conformity with generally accepted accounting
principles (GAAP) in India requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities
on the date of financial statements.

AS 9
2. Revenue Recognition:
Revenue from sale of goods is recognised on transfer of all significant risks and rewards of
ownership to the buyer which is on dispatch of goods. The amount recognised as sale is
exclusive of sales tax/VAT and are net of returns. Sales are stated gross of excise duty as well as
net of excise duty; excise duty being the amount included in the amount of gross turnover. The
excise duty related to the difference between the closing stock and opening stock is recognised
separately as part of ¶material cost·.
Revenue from service is recognised on rendering of services to customers.
Dividend income is recognised when the right to receive payment is established.
Interest income is recognised on the time proportion basis.
AS 19
3. Lease Accounting:
Assets taken on operating lease:
Lease rentals on assets taken on operating lease are recognised as expense in the Profit and
Loss Account on an accrual basis over the lease term.
Assets given on operating lease:
The Company has provided tinting systems to dealers on an o perating lease basis. Lease rentals
are accounted on accrual basis in accordance with the respective lease agreements.

AS 2
4. Inventory:
(a) Raw materials, work in progress, finished goods, packing materials, stores, spares, traded
items and consumables are carried at the lower of cost and net realisable value. The
comparison of cost and net realisable value is made on an item-by-item basis. Damaged,
unserviceable and inert stocks are suitably depreciated.
(b) In determining cost of raw materials, packin g materials, traded items, stores, spares and
consumables, weighted average cost method is used. Cost of inventory comprises all costs of
purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all
other costs incurred in bringing the inventory to their present location and condition.
(c) Cost of finished goods and work -in-process includes the cost of raw materials, packing
materials, an appropriate share of fixed and variable production overheads, excise duty as
applicable and other costs incurred in bringing the inventories to their present location and
condition. Fixed production overheads are allocated on the basis of normal capacity of
production facilities.

AS 13
5. Investments:
Long term investments are carried at cost. Provision for diminution in the value of long term
investments is made only if such a decline is other than temporary in the opinion of the
management.
Current investments are carried at lower of cost and fair value. The co mparison of cost and fair
value is done separately in respect of each category of investments. Profit and loss on sale of
investments is determined on a first-in-first-out (FIFO) basis.

AS 11
6. Transactions in Foreign Exchange:
Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the
transaction. Exchange differences arising on foreign exchange transactions settled during the
year are recognised in the Profit and Loss Account of the year.
Monetary assets and liabilities denominated in foreign currencies, which are outstanding as at
the year end are translated at the closing exchange rate and the resultant exchange differences
are recognised in the Profit and Loss Account.
The premium or discount on forward exchange contracts is recognized over the period of the
contracts in the Profit and Loss Account.

AS 29
7. Provisions and Contingencies:
The Company creates a provision when there exists a present obligation as a result of a past
event that probably requires an outflow of resources and a reliable estimate can be made of the
amount of the obligation. A disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not require an outflow of
resources. When there is a possible obligation or a present obligation in respect of which
likelihood of outflow of resources is remote, no provision or disclosure is made.

AS 20
8. Earnings Per Share:
The Basic and Diluted Earnings Per Share (´EPSµ) is computed by dividing the net profit after
tax for the year by weighted average number of equity shares outstanding during the year.